Inefficiencies in Eskom’s governance - particularly with fruitless and wasteful expenditure, criminal conduct and lack of consequence management - has been adding to the primary energy cost and consequently the tariff to the consumer.
This was said by the Office of the Auditor-General of South Africa (AGSA) on Tuesday as it appeared before the Parliament’s Standing Portfolio Committee on Public Accounts (SCOPA) on Eskom’s financial results for the 2023/2024 financial year.
The AGSA said specific deficiencies in internal control included weak controls that failed to detect, assess and prevent non-compliant procurement, while lack of oversight and proper recording led to unaccounted losses.
This is as committee members expressed concern to have to dissect financial statements from a year ago without indication of what improvements had been made and implemented in that financial year.
Committee members also insisted on the adoption of real-time audits, particularly in disbursements of the R450 billion National Treasury debt-relief package for Eskom.
Madidimalo Singo, the business unit leader at the AGSA, said feedback was happening in real time with the audit committee, management and the board as it related to the repeat findings.
However, he said that the office had noted continuous lack of accountability and ineffective oversight over the audit action plans, which is an area Eskom needed to improve on.
“We have noted how the entity is struggling with fruitless, wasteful expenditure as well as losses through criminal conduct and again what we have noted is how the lack of consequence management in these areas contribute to this undesirable expenditure,” Singo said.
“We know that there is an increase in the cost of electricity. You would have seen how we reflected on the issue of the primary energy cost, to the extent that the audit action plans are not effective in addressing these three undesirable expenditures. We will continue to see a rise in the primary energy cost and consequently a rise in the cost of electricity.
The AGSA part of the concerns around the non-compliance with recommendations, some over five years after they had been made, was the slow pace on internal investigations which when finally concluded failed in the consequence management.”
She said recommendation to the Eskom board and the management, and to the management committee had been to strengthen the internal mechanism of looking after expenses and consequence management noting that the long delays in concluding investigations contributes and perpetuates the continued non-compliance with laws and regulations.
“We have told the board and management they have to fast track investigations into non-compliance, and when it comes to the audit action plan, if there isn’t satisfactory implementation, there must be consequence management,” she said.
Singo said the AGSA would engage with the Eskom board on possibilities of more frequent audit updates, noting that with other SOEs, AGSA did half year review financial statements and issued a limited assurance engagement report, which would provide more real-time assurance.
Members of Parliament were concerned if Eskom was adhering to the debt-relief conditions, which the AGSA clarified had been delayed by only the disposing of non-core assets, more specifically the Eskom Finance Company which has found a buyer and awaits competition Commission and National Treasury approvals.
Answering questions, Deloitte & Touche industry leader for consumer in Africa, Andre Dennis, said the damaged Medupi Unit 4 transformer had been written off to the tune of about R3.1bn in the 2023/24 financial year with the rebuild set to appear in the 2024/25 financial year.
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